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NY Dept of Labor Proposes Drastic Changes to Employers’ Use of Direct Deposit and Payroll Cards
BlogEmployment Law Watch

The New York State Department of Labor (NYSDOL) recently published a proposed rule governing how employers pay their employees through direct deposit and payroll debit cards. While the majority of the proposed rule focuses on new requirements regarding the use of payroll cards, the proposal, if adopted, would also effectively require every Empire State employer to obtain re-authorizations for direct deposit from all affected employees.

Requirements for Direct Deposit

New York law already prohibits employers from paying their employees through direct deposit without first obtaining the employees’ advance written consent. With the proposed rule, the NYSDOL seeks to add additional requirements regarding the use of direct deposit consent forms. First and foremost, the form would need to be provided in English and in the primary language of the employee, and must contain:

A description of every method of payment available to the employee

A statement that the employer may not require the employee to accept wages by direct deposit or by payroll debit card

A statement that the employee may not be charged any fees or services that are necessary for the employee to access his or her wages in full

If offering payment of wages by payroll debit card, a list of locations where employees can access and withdraw wages at no charge to the employees within reasonable proximity to their place of residence or place of work

Additionally, employers would be required to ensure that consent is obtained voluntarily and could not make consent a condition of hire or of continued employment. Employers who opt to use electronic notice and consent forms would need to ensure that employees have the ability to view the notice and consent in print without cost during working hours, and notify the employees of that option.

Any direct deposit consent form that does not contain the above information and comply with the above specifications would be invalid under the proposed rule. Practically speaking, this means that, if the NYSDOL’s proposed rule is adopted, most, if not all, New York employers would be required to obtain new direct deposit authorizations.

Notably, not all employees are subject to the NYSDOL’s proposed rule. Specifically, under the proposal, the advance notice requirements would not apply to persons employed in bona fide executive, administrative, or professional capacity earning at least $900/week, as well as employees working on a farm not connected with a factory. This is consistent with existing law.

Requirements for Payroll Debit Cards

The proposed rule also seeks to impose onerous new requirements for employers who pay their employees using payroll debit cards. First, the written notice and consent would need to be signed by the employee and provided to the employer at least seven days before the employer issues the first payment. Additionally, an employer would not be permitted to use payroll debit cards for wage payments, unless:

The employee has access to at least one ATM that offers withdrawals without any fees

The employee has at least one means of withdrawing the total amount of wages for each pay period or the entire remaining balance without incurring a fee

The payment of wages cannot be linked to any form of credit, including a loan against future pay or any cash advances based on future pay

What Does This Mean For My Company?

New York employers have until July 15, 2016 to submit comments regarding the NYSDOL’s proposed rule. Prudent employers, however, should begin to review their payroll practices now to ensure compliance with the proposed rule, which may well be adopted without modification. At a minimum, a review of existing direct deposit consent forms is a must for New York businesses.